CAT Caterpillar Inc

By Andrew Tangel 

Caterpillar Inc., the world's largest maker of mining and construction equipment, said it predicts 2017 will be as rough as this year as the company suffers in the global commodities bust.

The Peoria, Ill.-based manufacturing giant said Tuesday it expects next year's revenue from sales of its hulking yellow bulldozers, trucks and other heavy machines won't be "significantly different" from the about $39 billion in sales it expects for all of 2016, its fourth-straight year of declining revenue. The company previously said it expected $40 billion to $40.5 billion in revenue for 2016.

"Economic weakness throughout much of the world persists and, as a result, most of our end markets remain challenged," Caterpillar Chairman and Chief Executive Officer Doug Oberhelman said in a prepared statement. The company indicated it could report a loss for all of 2016 because of an expected accounting adjustment in the fourth quarter related to pension and postretirement benefit costs.

It would be Caterpillar's first annual loss since 1992, according to a Caterpillar spokeswoman.

Caterpillar's outlook for 2017 provides the first glimpse into the company's fortunes in the tenure of incoming CEO Jim Umpleby, who is slated to take over Jan. 1. Caterpillar last week announced Mr. Oberhelman would step down as the company reels from his bold bet on the global commodities boom that ultimately backfired.

The company said the accounting adjustment could amount to a hit of $2 billion, or $3.50 a share, to this year's posttax earnings. The Caterpillar spokeswoman noted changing interest rates and investment returns could affect the ultimate size of the expected fourth-quarter adjustment.

Caterpillar also trimmed its profit outlook for the year, saying it expects earnings per share of $2.35, or $3.25 excluding restructuring costs. That forecast doesn't include the looming adjustment.

Trouble continued for Caterpillar in the third quarter, with revenue plunging 16% to $9.2 billion from the prior year as sales of construction, mining and oil equipment remained weak. Mr. Oberhelman cited an abundance of used construction equipment and idle locomotives in North America, and idle mining trucks around the globe.

Without an increase in orders, the company said the downturn could stretch into the first half of next year. If commodity prices stabilize or rise that could make for a rosier second half, it said.

Caterpillar pointed to indications of hope: commodity prices off their recent lows, signs of improvement in the Chinese construction market and the likely bottoming of construction sales in Russia and Brazil.

But the company said it hasn't seen an increase in orders for new equipment. Construction activity and equipment sales in North America also fell short of predictions, and there is continued uncertainty in Europe in the wake of the U.K.'s Brexit vote.

"We remain cautious as we look ahead to 2017, but are hopeful as the year unfolds we will begin to see more positive momentum," Mr. Oberhelman said in the statement.

Over all for the third quarter, Caterpillar reported a profit of $283 million, or 48 cents a share, down from $559 million, or 94 cents a share, a year earlier. Excluding restructuring costs, earnings per share fell to 85 cents from $1.05 a year ago.

The company is splitting its top jobs and named Dave Calhoun, an executive at a New York private-equity firm, as Caterpillar's next chairman when Mr. Oberhelman steps down from that role at the end of March.

Mr. Oberhelman embarked on an ambitious expansion that included building new plants, beefing up the company's ranks and, in 2011, buying Milwaukee mining-equipment maker Bucyrus International Inc. in an $8.8 billion-deal, Caterpillar's largest.

But demand has dropped for Caterpillar's heavy machines around the world. The company is in the midst of a restructuring that will close or consolidate 20 plants by the end of 2018.

Caterpillar continued to shrink its workforce in the third quarter, to 97,100 full-time employees, down from 100,000 three months ago and significantly lower than the 108,900 full-time employees it had a year ago.

Caterpillar's stock price has suffered. Shares are about flat over the last five years, compared with a 75% rise by the broader S&P 500. Caterpillar shares were down less than a percent to $85.73 midday Tuesday.

Joshua Jamerson contributed to this article.

Write to Andrew Tangel at Andrew.Tangel@wsj.com

(END) Dow Jones Newswires

October 25, 2016 11:49 ET (15:49 GMT)

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